Logbook Loan Blog Library

With money so tight for most people, it is sometimes inevitable to resort to personal loans to meet a wide variety of financial needs. Personal loans especially the unsecured loan offers are quick and easy to avail. But at the same time, they’re also quite expensive. In fact, if you have bad credit and you want an unsecured loan, you’ll pay a steep cost in exchange for the quick cash.

Take for instance, payday loans. You can borrow from £100 up to £1,000 at a representative APR of 1,000%. The loan is to be repaid in 28 days or on your next paycheck. If you have good credit, loan deals are definitely cheaper. Either way, personal loans shouldn’t be the only option if what you need is only a small amount.

Financial experts recommend credit cards in some cases, as it can be better interest-wise. The premise is that you only need a relatively small amount of money to tide things over. If you have good credit and you only want to borrow £3,000 or less, consider using your credit card instead. The interest rate may be lower compared to standard personal loans offered by major banks in the UK.

Currently, the best personal loans at the most competitive rates available in the UK start from £7,500. The lowest interest rate is 8%. But if you only plan to borrow £3,000 or less then the interest can go up to 14.9%. This is where credit cards can be helpful. If you have existing debt, however, you may want to consider a balance transfer card. Some deals are also interest-free which you should take advantage. Remember though that there may be a transfer fee on some cards from 2.5 to 3%.

Whether you’re borrowing money to pay an existing debt or to buy something, you shouldn’t completely discount credit card as an option. Just make sure that the amount you plan to charge on your credit card is interest-free for the same length that you plan to pay for said loan. For larger loan amounts, however, this is where personal loans from your bank becomes a better option.

If you’re in the market for a personal loan, there are two major types of loan products you should know about. One is called secured loans because these loan offers require a security to be approved and another is referred to as unsecured loans, which is basically the opposite of secured loans. Both types have their sets of advantages and disadvantages. How do you know which type is best for you? Keep reading for a quick comparison of the two loan types.

Secured Loans

As mentioned, secured loans are secured against an asset, for instance, your home, car and other types of assets such as stocks, bonds and even savings account. The lender will hold the title, logbook document or deed of the asset until you can fully repay the loan.

One of the best advantages of secured loans is the larger loan amount. Since there’s security involved, your lender can lend you more money. Even if you default on the loan, the risks are little to none for the lenders. As per the credit agreement, the lender can repossess your asset and sell it to cover for your liabilities.

Some of the most common secured loans available in the UK include mortgage loans, home equity line of credit, auto loans and logbook loans among others. To qualify for the loan, you must be of legal age, a UK resident and obviously, you must have the asset to use for collateral.

Unsecured Loans

If you don’t have any asset to use for collateral, this is where unsecured loans come handy. Unsecured loans are more accessible and easier to get approved for. It’s also fast hence perfect for immediate financial needs. With unsecured loans, you only need to meet basic requirements and there’s no collateral to worry about. On the downside, the loan amounts are small and limited. In most cases, this type of loans may also come with high interest rates because of the high risks lenders have to face when lending you money.

Some of the most common unsecured loans available in the UK include payday loans, credit cards, personal signature loans and personal lines of credit. These loan products are specifically offered for people with bad credit issues. Credit checks are rarely required so approval is quick. Some lenders even guarantee same day approval. You can also receive the cash immediately making it an excellent loan option for a wide range of immediate personal needs.

One of the cheapest and probably easiest ways to raise quick funds is to borrow money from family or friends. If you know someone with spare cash you can loan, why even look elsewhere, right?

Though convenient and cheap, taking out a loan this way may entail not only financial consequences but also emotional stress. Since there’s rarely any written agreement involved in this type of borrowing, borrowers tend to break their word when it comes time for collecting payments. This is why borrowing money from family or friends can be a bad idea in the first place.

Unlike with personal loans from banks and high street lenders taking out a loan from someone you know is less formal. All you have to do in most cases is ask and the person hands over the money immediately. Both parties usually agree upon the date of payment. It could be after a week, a month or even longer. The best part for the borrower’s end is the fact that there’s really no or very little interest rates involved. The downside, the amount of money you can borrow may be limited.

With the low to no interest rates, it’s no wonder why a lot of people are borrowing money from family or friends. But there’s just one danger you need to be really careful with. And that’s the tendency to be lax with your payments. Some even go as far as default on the loan without notice to the lender.

When you fail to repay the loan on the agreed date, it’s not only the financial aspect that’s affected but also the relationship. If this is something you want to completely avoid, it may be best to borrow money elsewhere. Remember that at the end of the day, your relationships with people is more important that money.

If you’re tight in cash and you need a personal loan quick, there are a number of personal loan options available. You may have a hard time getting approved for one, however, if you have a poor credit rating. If you ever missed payments on your credit cards, mortgage or loans before, these records can go to your credit file and can drastically affect your credit score. In turn, your credit score can dramatically affect your chances for loan approval.

Bad Credit Loan Options

What do you do when you can’t get a loan because of bad credit? There are several quick cash loans you can consider. Below are some of these loans:

Payday loans

Payday loans are very popular but also highly controversial in the UK. The financial product offers the promise of quick cash but at a cost. You can borrow anywhere from £100 to £1,000 at a whopping average representative APR of 1,000%.

Financial experts have been slamming payday loan lenders for their unfair terms that basically put borrowers with little to no options in a very difficult situation. Despite the warnings, more and more borrowers resort to the product for quick cash solutions to immediate financial problems.

Guarantor loans

If you’re looking for something more affordable, guarantor loans got you covered. The financial product is significantly cheaper because there is one key factor that reduces the risks on the lender’s end. It’s the guarantor requirement. If you have bad credit and you want to avail a guarantor loan, all you need to do is find a qualified guarantor to co-sign the debt agreement with you. A qualified guarantor is someone with good credit and is a UK resident. He or she should also agree to cover the liabilities in your behalf in the event that you are unable to repay the loan.

Logbook loans

Another option that offers larger loan amounts and longer repayment terms is logbook loan. The loan is secured against your car hence the larger loan amounts. The average APR for logbook loans is 400%, which is also quite expensive compared to guarantor loans at 50% Rep APR. But the biggest disadvantage for logbook loans is the risk of repossession. Because your vehicle is used as collateral, you can lose your car to your lender if you cannot meet the monthly repayments. The lender will eventually sell it to cover for your outstanding balance.

What We Recommended

While payday, guarantor and logbook loans are quite easy to avail especially if you have bad credit to worry about, the loans are only temporary financial solutions. If you don’t want to get stuck with high interest rates and limited loan options, you should aim to improve your credit score for long-term benefits. Boosting your score can take time and a lot of effort but know that it has its benefits.

One way you can start building your credit score is to apply for a bad credit credit card. That advice may seem counterintuitive but there’s really a good reason why it makes sense. If you apply for a credit card, that goes to your file. If you commit to keep the card’s balance at 30% or below its credit limit, that’s a spending habit credit agencies will consider responsible. If you pay your credit card bill on or before its due date every month, that’s another good record that goes into your credit file. If you keep doing these habits month after month, it’s only a matter of time until you see significant improvements on your credit score.

When you have a poor credit rating, you probably know by now how hard it is to avail a personal loan. No matter which way you look at it, a poor credit rating is a liability you don’t want to be stuck with. If you want better loan terms and cheaper interest rates, there’s really only one thing you need to d and that is to work hard in improving your credit score.

What is a credit rating?

To effectively improve your credit score, it pays to understand what exactly a credit rating is. A credit rating is a financial concept used by lenders and financial institutions to determine a person’s ability to fulfill his or her financial obligations considering previous transactions and financial history.

Credit scores are in numerical forms. The FICO score, for example, has a range scoring from 301 to 850, which is then categorized into bad credit, poor credit, fair credit, good credit and excellent credit. The lower the number, the poorer your credit score is.

Understanding the Credit Score Formula

There are different elements that comprise your credit score. If we’re using the FICO formula, there are basically five categories you should know about and they include:

Payment history (35%) – A large part of your credit score is based on your payment history. This is why financial experts keep on reiterating the advice to always pay your bills on time. A number of missed or delayed payments can hurt your credit score. If you have debts that went into collection that will be another hit that can be hard to rectify.

Debt owed (30%) – The amount of debt you owe is another major consideration when calculating your credit score. If you have credit cards, how close are the charges to the credit limit? How much do you on personal loans? In general, the lower the debt you owe especially on your credit cards, the better for your score.

Credit history (15%) – There is no shortcuts when building your credit score. Another factor that affects your credit rating is the age of your credit history. Agencies look at past transactions and a number of credit references when formulating your score.

New credit (10%) – While only 10% of your credit score, new credit inquiries is another factor worth noting. Fortunately, this one you are entitled to some control. To avoid a lot of credit inquiries, you can check your own score for free and monitor it regularly too.

Types of credit (10%) – The more diverse your types of credit are, the better for your credit score it will be. It would really your score if you have a mix of different types of accounts like a major credit card in addition to a retail card.

Why it’s important to improve your credit rating?

Having a good credit score is what you should aspire to have if you want the best deals on your personal loans, mobile phone contracts and other financial offers or deals. Financial institutions tend to favor lending money to customers with good credit because there’s less risks involved.

Lenders are confident that customers with good credit can repay the loan or liability hence the lower interest rate. On one hand, customers with bad credit usually struggle to get approved for a personal loan because they are tagged as high risks borrowers. Most banks and major lenders are likely to reject your application if your credit rating does not meet their standard. In this case, you’ll be left with limited loan options. But worse of all, the interest rates will be steeper than if you have good credit.

Emergencies can hit in the most unexpected times. If you find yourself in one and you have a poor credit rating, chances are high that you’ll have a hard time getting approved for a personal loan. But there’s still some good news. If you own a vehicle and you are left with no choice, you can apply for a logbook loan. So what is a logbook loan? A logbook loan is a secured personal loan where you use your vehicle for collateral. Put simply, you are basically borrowing money against your vehicle. Most lenders in the UK can lend you between £500 and £50,000.

But there are just a couple of downsides. Logbook loans can be quite expensive. The average APR for the financial product is a staggering 400% or more. Vehicle repossession is also a possibility. If you can’t repay the loan, there’s a high chance that you might lose your car to your lender. In any case, logbook loans remain an accessible alternative for people with bad credit. You just need to make sure you find the best deals with the most affordable rates before you sign any credit agreement. To help you scout the market for the best logbook loan deals, here are some things you can do:

1. Ask for recommendations

Whether it’s your first time taking out a logbook loan or not, one of the best ways to find a good deal is to seek for recommendations. If you know someone who has applied for a logbook loan, ask him or her if they would recommend their lender. If they were happy with their transaction, chances are high that you now have a potential lender at your disposal. While you’re at it, you may also want to read customer reviews. Rather than listen to lenders advertising themselves, you are better off taking it from customers who’ve been there and done that.

A lot of positive customer reviews are a good sign. But make sure you’re also reading authentic customer reviews.

2. Check your lender’s track record

Aside from reading customer reviews, you’d want to go the extra mile by investigating your lenders track record. There are numerous lenders offering logbook loans online. Some of them may advertise the lowest interest rates ever but only to burden you with hidden fees. Some lenders are also very new in the industry. If you were going to borrow money especially with your vehicle as security, you’d want a lender with a solid track record. The longer the lender in the business, the better it is for your peace of mind.

3. Use comparison sites

You may also use reliable comparison sites when comparing lenders and different logbook loan deals. Rather than spend hours online browsing through thousands of loan deals, you can rely on comparison sites to do most of the work for you. These sites have done the research and have already scouted the market for the best lenders offering the best rates. All you have to do is sift through them based on key factors such as APR, loan repayment terms, loan amount and customer reviews among other things.

4. Read the fine print

To avoid paying hefty fees and charges, you’d want to read the fine print before you close any deal. Most lenders will not disclose all the associated charges related to your logbook loan. As borrower, it’s your responsibility to go the extra mile. Read the fine print for more info on hidden fees and vehicle repossession. You’ll usually learn everything you need to know on the fine print.

You still haven’t found the way to check if you can apply for logbook loan? Do that by visiting this site.